Eggs prices rise as cage farmers embark on $200 mln upgrade

May
15 (BusinessDesk) – The cost of battery farmed eggs in New
Zealand is on the rise as farmers begin converting to new
welfare code compliant cages, a change estimated to cost
the industry as much as $200 million.

Egg prices have
risen 5.5 percent in the past year, according to Statistics
New Zealand, an increase that the Egg Producers Federation
(EPF) says is in part driven by changes made under the 2012
Animal Welfare (Layer Hens) Act, which requires hens to be
housed in larger, ‘colony’ cages. The government has
estimated the changes will drive up egg prices by 10 percent
to 14 percent and the EPF says it will cost its members $150
million to $200 million.

“It’s a sizeable sum of money
across a relatively limited number of players and our
understanding is the majority of current cage farmers will
move to colony,” Michael Brooks, executive director of EPF
told BusinessDesk. There are currently 118 cage egg farms
across New Zealand, making up about 83 percent of the egg
market and the changes mean a “fundamental
restructuring” of the industry, he said.

The legislated
shift to colony cages gives hens 750 square centimetres of
space each, up from the current minimum of 550 sq cm, and
more humane touches such as a scratching pad, perches and
space for nesting.

Farmers say in addition to the cost of
new equipment and rehousing their hens, colony cages were
also less efficient than current cages and take up more
space.

“There’s no way around the fact that colony is
a more expensive method of producing eggs than cage,” said
Hamish Sutherland, general manager at Farmer Browns, which
has begun to shift to the new cages. “As colony gets a bit
more volume in it and it becomes more mainstream we might
see that premium over cage come back a
bit.”

Supermarkets take 50 percent of total eggs
produced, with the rest going to industrial food
manufacturers, cafes and bakeries. In supermarkets cage eggs
still make up 75 percent of sales, as consumers seek out the
cheapest option, he said.

“Wellingtonians might be
happy to pay $18 for eggs benedict, but in Tokoroa it’s
fried eggs and bacon on toast for 10 bucks - they don’t
give a toss if its free range, they just want a big feed
before they’re out cutting down the pine trees,”
Sutherland said

Over the past three months, a dozen cage
eggs on average cost $3.67, while a dozen colony laid eggs
cost $4.67, and free range eggs were on average $7.20, he
said, citing industry data.

The shift to colony cages is
staggered, with 40 percent of the industry required to
change over by 2018. But with the average cycle of a laying
hen about 18 months it is a tight timeframe for many
farmers.

For some farmers the change won’t be worth it
and EPF’s Brooks expects about 8 percent of egg farmers to
shut down operations once the 2022 deadline rolls around.

“While there might be a few less it will still be a
very competitive industry and while there’s people going
out there are other people coming in,” Brooks said.

Across the Tasman supermarket chain Woolworths, which
owns Countdown in New Zealand, has vowed to rid its shelves
of cage eggs by 2018, as well as no longer using them as
ingredients in its own branded products. Rival grocery
chain, Coles, has also adopted a cage-free policy for its
own branded eggs but still stocks the cheaper
alternative.

Another element pushing up the price of eggs
was gains in the cost of feed which makes up about 65
percent to 75 percent of the cost of an egg, Brooks said.
Over the last five years the price of New Zealand feed wheat
has climbed about 50 percent, with the most recent price at
$430 per tonne.

There had been some export pick up for
New Zealand eggs, as Australian exporters were impacted by
disease, markets like Papua New Guinea had opened up “a
little bit for New Zealand,” Brooks said.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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